NMLS ID #211652 Arizona, Loan Consultant

Monthly Archives: June 2013

Interest rates are now up about 1.25% from their rock bottom lows in October 2012 and again in May 2013. The inevitable interest rate increase from all-time lows is continuing. Following the Federal Reserve meeting last week, it seems that if the economy performs as expected, then the Fed plans to taper its bond purchases as early as later this year. Over the past few years, the Federal Reserve bond purchase program has helped mortgage rates drop and stay at historically low levels.

However, even though interest rates are volatile, they do not move in a straight line up or down. They have been moving so fast the last few days, as a reaction to the Fed news of possible pull back that we may see some correction. However, that is conjecture, and anyone contemplating a mortgage these days needs to be aware that the mortgage market is highly volatile right now. It seems the Federal Reserve believes the economy is no longer in recession, and as a result the Fed has indicated that it appears ready to scale back its bond purchases.

The rapid rise in mortgage rates has been shocking, but it had to happen at some point. To boost the economy during the financial crisis, the Federal Reserve undertook an unprecedented program to purchase enormous quantities of mortgage backed securities and U.S. Treasuries in an attempt to push rates down. Before the Fed started this program, rates were about 1.5% to 2% higher, so it looks like that is where we are headed again. We are already a good bit of the way there!

So, what you are witnessing with the rise in rates is the market trying to determine the realistic range of mortgage rates without the intervention of the Federal Reserve. Lots of people try and guess the direction of the market and react in advance for their own benefit.. The market buys on rumor and sells on news.

So clearly the market is signaling that it believes the Fed is done with this part of the stimulus. Now it seems we will see the market reconfigure to the new reality.

So, you have been in your current home for a while and you are looking for something a little different. Maybe you are starting a family or you recently married and want to build a home together. There are many reasons why people “move up”. No matter what your reasons are for purchasing your next home, there are some things you need to be prepared for.

I did touch on some of this information in my previous blog “Buying Without Selling”. So if you are looking to purchase a new home while retaining your current home, please feel free to take a peek at that post, but for right now I’m going to write about selling your current home to purchase a new one!

The ideal situation would be for you to simultaneously sell you current home and purchase your new home. This is possible; however the timing is a little tricky. In order to complete this type of transaction smoothly you are going to need a good realtor and loan officer working on your side.

In our current AZ market, selling your home before buying can be easily done. Home values are up and inventory is down, so if a home is priced properly you can sell quickly. Many people have been in their homes for about 7+ years and now have just enough equity, if equity was previously an issue, in their home to move up. However, many people choose to take different routes when looking to move up.

There is an option known as Bridge Financing and what this entails is technically owning two homes for a brief period of time. Bridge Financing is through a financial institution. You will take out an equity loan similar to a home equity loan but the bank will know it is temporary and the repayment structure will be different. It will not carry an early termination fee like home equity loans. There will be a limit on the amount you can borrow on the current home depending on how much equity there is. This loan will give you the funds to make the down payment and pay closing costs for your new home, then repay the loan once the current home is sold. Generally, bridge lenders give you 6 months for the loan with the possibility of extending an additional 6 months. Payments on a Bridge can be deferred but when applying for the new 1st mortgage; the lender will qualify you carrying quite a bit of debt.

I know this sounds a little complicated, but it is actually simpler than you’d think. When it comes down to it there are many ways to “move up” and where there’s a will there’s a way. In the end no matter what you want to do you should always consult a professional. Don’t hesitate to call your loan officer, ask questions and look into what is going to be your best option to get you into that new home. If you have any questions or concerns please feel free to contact me at Ingrid.Quinn@cobaltmortgage.com or visit me at http://www.coblatmortage.com/ingridquinn .

Finding the perfect house is like love at first sight. You can search and search and when you least expect it, you will fall in love, but when love at first sight strikes, you need to be cautious. Just as you would get to know a person and see if you are compatible before settling down you should get to know the house. A home is where you build your life and this is a commitment not to be taken lightly. I always suggest that my clients need a professional’s eye when looking into the possible issues of a home.
Think of having a home inspection like bringing your newfound love home to meet your parents. Just as your parents will scrutinize this new person in your life, the home inspector will scrutinize the house. Both simply want the best for you and are willing to do what it takes to show what’s really underneath the surface.

Normally, you have 10 days according to the Arizona standard real estate contract, to do all the inspections on a home, structural, mechanical, well and septic, termite, permits with the county, crime reports, etc. The cost of the inspection is outside of your loan transaction. Usually, I wait for the go ahead that the inspection was satisfactory and that there are no deal killing issues with the home before I order the appraisal for my client. Why spend $400-$500 on the appraisal if the inspection is not acceptable?
I highly recommend doing all the necessary inspections and that unless you are a licensed contractor and know a lot about a home and its construction that you have a licensed professional perform the home inspection. Your Realtor should give you the names of a few inspectors to contact.
I would be interested in your comments about any home inspection stories you can share. Please comment on my blog page. I can be contacted at Ingrid.quinn@cobaltmortgage.com or visit my website at http://www.cobaltmortgage.com/ingridquinn.

The number 1 question I get about using alimony and/or child support income to qualify for a home mortgage is what if you have not been receiving alimony for 12 months? Well, good news, many people do not have to wait that long. For these situations, I recommend pre-approval in advance of looking for a home. Our automated underwriting engines (DU or LP) will determine the length of time this type of income needs to be received for the loan approval. It is common for a divorcee to want to use alimony/child support income to purchase a home immediately after a divorce.

Below are the guidelines as to how to document this income:

Document that alimony or child support will continue to be paid for at least three years after the date of the mortgage application, as verified by one of the following:

• A copy of a divorce decree or separation agreement (if the divorce is not final) that indicates payment of alimony or child support and states the amount of the award and the period of time over which it will be received. A copy of the children’s birth certificates may be required. Note: If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender should not consider any proposed or voluntary payments as income.
• Any other type of written legal agreement or court decree describing the payment terms for the alimony or child support.
• Documentation that verifies any applicable state law that mandates alimony, child support, or separate maintenance payments, which must specify the conditions under which the payments must be made.

Document the borrower’s regular receipt of the full payment, as verified by:

• deposit slips,
• court records,
• copies of signed federal income tax returns that were filed with the IRS, or
• Copies of the borrower’s bank statements showing the regular deposit of these funds.

Review the payment history to determine its suitability as stable qualifying income. Each individual’s situation with the ex-spouse is different so it will be important to check with the lender you choose how to work it out. If you have further questions or comments, please contact me at Ingrid.quinn@cobaltmortgage.com or visit me at http://www.cobaltmortgage.com/ingridquinn.

Aside from lifeguarding, life slows down in Arizona. It’s too hot to move at a fast pace. Many industries in the Phoenix area slow down. Restaurants are slower, hotels are offering staycation discounts to the locals stuck hanging in the valley, and it’s too hot to hold Open Houses. Granted there are the dedicated agents who go out on Saturday and Sunday and place their signs on street corners risking heat exhaustion.

We have started to see a housing recovery though a slow down of homes listed is likely in the summer months. Sellers will consider listing homes again in late August or early September and the batch of buyers who need to move their families in the summer are already doing so.

Home values have increase, rates have gone up some but a mortgage in the 4%s is still a great deal! I remember the summer of 2000 selling interest rates at 8.75%. Below is a historical graph of where mortgage rates have been in the last since 1992.

Work with a Realtor! This is a statement that I always have and always will stand by. When looking to buy or sell your home, you need a professional’s assistance. There seems to be a recurring question that always comes to my attention especially from first time home buyers, “Who pays the Realtor?” Realtors’ commissions are taken care of from the sellers’ side of the transaction in Arizona. Occasionally, there are administrative fees charged by the buyer’s agent’s company paid by the buyer but that will be disclosed in a buyer/broker agreement.

When selling your home you should ask the realtor for an MLS portfolio. This is going to show you 2 important things, such as how the Realtor photographs a home and the way they describe a home. Also, where is your home going to appear? There are many marketing sites in print and on the internet that Realtors may subscribe to. You want your home to be as marketable as possible and this will show in a Realtor’s portfolio.

When buying a home you shouldn’t hesitate to work with a realtor. Buyers are using the internet more and more to preview homes and many buyers will go from open house to open house looking for themselves. A buyer should use referrals to meet a qualified agent. Have an interview to make sure the agent and you are on the same page. Remember the agent representing the seller has first obligation to his/her seller. The agent is going to be your advocate and negotiator. That is why I recommend an agent independent of the seller. There are many steps throughout the body of the contract that must be followed when an offer has been made. You will want the assistance of a professional to navigate your way through this process.

With graduation season upon us, student loan repayment clocks will start ticking. So I decided to tackle a small but significant question in qualifying for a mortgage. Banks and lenders take a look at a borrower’s capacity to repay a mortgage loan along with the rest of their debts.
When analyzing a borrower’s income and debt, we have debt to income (dti) ratios to adhere to. Generally, housing expense to income should not exceed 35% of a borrower’s income. Total debt, including housing expense, car loan payment, and student loan and credit card payments should not exceed 45-50% of income. Again, keep in mind this is a general rule. Just because someone does not have additional obligations over their housing expense does not automatically mean lenders will allow housing expense to go up to 50% of someone’s income. This is a common misconception. Below are the guidelines for those types of loans depending on the type of financing for a home that is requested.

Deferred Installment Debt for Conventional Loan Qualifications
Deferred installment debts, such as deferred student loans, must be included as part of the borrower’s recurring monthly debt obligations. If the borrower’s credit report does not indicate the monthly amount that will be payable at the end of the deferment period, the lender must obtain copies of the borrower’s payment letters or forbearance agreements so that a monthly payment amount can be determined and used in calculating the borrower’s total monthly obligations.
Exception: For a student loan, in lieu of obtaining copies of payment letters or forbearance agreements, the lender can calculate a monthly payment using no less than 2% of the outstanding balance as the borrower’s recurring monthly debt obligation. However, if any documentation is provided by the borrower or obtained by the lender that indicates the actual monthly payment, that figure must be used in qualifying the borrower.

Deferred Installment Debt for FHA Loan Qualifications
Debt payments, such as a student loan or balloon note scheduled to begin or come due within 12 months of the mortgage loan closing, must be included by the lender as anticipated monthly obligations during the underwriting analysis. Debt payments do not have to be classified as projected obligations if the borrower provides written evidence that the debt will be deferred to a period outside the 12 month timeframe.
Deferred Installment Debt for VA Qualifications
If student loan repayments are scheduled to begin within 12 months of the date of VA loan closing, lenders should consider the anticipated monthly obligation in the loan analysis. If the borrower is able to provide evidence that the debt may be deferred for a period outside that timeframe, the debt need not be considered in the analysis.
Student loans can be in deferment for a period of time and many borrowers think they should not be counted in their dti. It is important to check qualifying guidelines with you mortgage lender. If you have any questions or comments, please contact me at Ingrid.quinn@cobaltmortgage.com or visit http://www.scottsdalemortgageexpert.com or http://www.cobaltmortgage.com/ingridquinn.